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05/03/2011

I agree with Becker that wealth creates the conditions for democracy, but I would suggest a slightly more complex causal sequence: wealth creates the preconditions for liberty (i.e., rights), and liberty the preconditions for effective democracy.

As John F. O. Bilson explained in a 1982 article (Civil Liberty—An Econometric Investigation, Kyklos, vol. 35, pp. 94, 103), “Almost any reasonable theory of freedom would predict a positive correlation between freedom and real income. On the demand side, freedom must be considered a lux­ury good so that the re­sources devoted to the attainment of in­di­vidual freedom are likely to be greater when per capita in­come is high. On the supply side, it is undoubt­edly more costly to repress a wealthy person than a poor person and the need to do so is probably less acute.” As people become wealthier and therefore more self-confident, and education (another “superior good” in the economist’s sense (what Bilson calls a “luxury good”)—the demand for it is a positive function of income) becomes more widespread and secure property rights become more highly valued, and with society able to afford, as the demand for law and order grows, a sophisticated security apparatus (including an independent judiciary) that maintains law and order without creating destabilizing resentments, what Bilson calls “freedom” and I call “liberty” become established features of the society. Pretty soon, however, people want more than “negative” liberty, the protection of personal security and property rights; they want a say in the choice of their rulers—they want the right to vote; it is an expansion, or at least the illusion of an expansion, in their liberty in the broad sense of having control over one’s destiny to the maximum feasible extent.

For this progression to work, the distribution of income and wealth mustn’t be too skewed—if the entire wealth of a country is concentrated in a tiny class, the demand for rights by the people as a whole, or at least a large swatch of people, will be weak, if Bilson and I are correct that liberty is a superior good.

It is no surprise, therefore, that democracy emerged in countries like Great Britain, the United States, France, and Germany after—though often long after—a considerable degree of liberty in the narrow sense that does not include the right to vote had been obtained by the citizens of these countries as a result of the rise of a substantial middle class. (This leaves unexplained the democracy without liberty found in a few ancient polities, such as Athens.) Magna Carta and the English Declaration of Rights of 1689 long preceded English democracy, and when the U.S. Bill of Rights (the first ten amendments to the Constitution of 1787) was enacted in 1789 the Constitution provided a limited role for voting. Apart from limitations on who could vote, the only federal officials for whom the people could vote directly were the members of the House of Representatives. All other federal officials were either elected indirectly (Senators and the President and Vice President) or appointed (judges and executive branch officials).

Democracy without liberty—the ancient Athenian formula—is highly risky, since it is easy for the first elected officials to refuse to allow (or to rig) the next election. The rarity of such polities suggests that such a democracy is not an equilibrium. More important, while a country need not be wealthy to be democratic, democracy without liberty is an unsatisfactory form of government because of the instability to which it conduces that I’ve just mentioned. But liberty is expensive, so how realistic is it to suppose that a poor country can be effectively democratic? India is the principal exception (and its democracy was suspended during the 1975-1977 “state of emergency” rule by Indira Gandhi), but a misleading one, in light of India’s very long and successful colonial occupation by Great Britain that preceded independence, though democracy has been a flop in other former British dependencies, notably Pakistan, formerly a part of British India. Latin America has a long history of unstable democracy.

The normal evolution is from autocracy to democracy with liberty the intermediate stage. This has been the pattern (though not an unvarying pattern) not only in Europe, but also in East Asia. Yet liberty and democracy sometimes arrive at the same time, as they did in the former Soviet sphere. It will be interesting to see whether this happens in any of the North African and Middle Eastern countries in which people are rebelling against autocratic governments, or whether there will be an intermediate stage of non- or semi-democratic government combined with enlarged personal liberty. Although these countries (with the exception of the small oil-rich countries) are poor by Western standards, they are not so poor (as many African countries are) that they cannot afford to provide their citizens with liberty, the precondition to stable, functioning democracy.